ESG (Environmental, Social and Governance) has become a buzzword in the business world in recent years, with brands increasingly recognising the importance of sustainability in their operations. While the environmental component has long been at the forefront of the sustainability movement, the social and governance components of ESG are often overlooked.
The ESG Global Monitor Report 2022, recently published for Singapore and Malaysia, reveals a noteworthy increase in the quality and quantity of social and governance reporting among Singapore and Malaysian brands. This development is not only significant for companies operating in local but also for those in the wider Asian region, as it highlights the growing importance of environmental, social and governance sustainability and the need for improvement. To enhance a brand’s ESG impact, it is crucial to understand these sustainability pillars better and how they can be integrated into a brand’s overall strategy.
Predictably, most brands (and indeed consumers) have focused largely on then “E” – environmental aspects. According to the Singapore report, when asked which aspects of ESG-related activities are most important, respondents said that addressing climate change (16%), protecting the environment (14%), and reducing waste and recycling (12%) were the most important issues.
But it is important not to forget the “S” and “G” aspects of ESG…
The ”S” in ESG stands for Social, and it refers to a company’s impact on its people and society. This includes issues related to human rights, community impact, employee relations, gender diversity and other societal issues.
- Companies that prioritise social initiatives often do well in employer branding, as job seekers are increasingly looking for jobs that create a positive impact on society. Bumble, the “female dating app,” is one such company that has dedicated itself to women’s empowerment. Female employees are encouraged to discuss career trajectories every few months and the company ensures women (especially working mothers) can manage flexible work schedules. Bumble’s dedication to female empowerment is reflected in the broader brand promise: “Bumble is where people go to learn how to establish and maintain healthier connections”.
- Social initiatives also extend beyond employees and impact the community at large. Starbucks is a brand that has made community giving a core part of its brand promise: “To inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time.” In Malaysia, Starbucks partnered with YWCA Kuala Lumpur to offer grants to students to help them improve their skills and knowledge. The program, called the Vocational Training Opportunity Centre (VTOC), aimed to provide vocational training to underserved communities.
The “G” is for Governance which encompasses a company’s internal management structures and practices including ethical standards, executive compensation, tax strategies, board diversity, and supply chain management.
In addition to social impact, good governance and its effectiveness can also be integrated into a brand’s strategy. Effective governance where supply chain is concerned, requires a thorough understanding of a company’s suppliers and ongoing monitoring of their performance.
- An example of a brand that has taken a proactive approach to ensure responsible management and ethical practices is Patagonia. The company’s “Footprint Chronicles” project displays videos on its website that show each step of the supply chain. Patagonia invites feedback form customers and admits any areas that need improvement, aligning with their brand promise to “build the best product, provide the best service and constantly improve everything we do.”
- Transparency in governance can help a brand demonstrate its commitment to ethical practices and responsible management.
It is essential for brands to integrate ESG principles into their brand DNA, addressing all components, including social and governance factors. Integration means a better chance of a more comprehensive and organic approach to sustainability.
Effective branding where ESG is concerned can play a significant role in shaping public and B2B perceptions of a company’s social and governance performance, helping brands distinguish themselves in the market and foster increased customer loyalty, employee engagement, and investor interest.
BUT only if it is not perceived to be “greenwashing” or “whitewashing” and for that to happen, your ESG strategies need be aligned with what your brand stands for.
Do you know what your brand really stands for?
